BUSINESS MONDAY: Dr. Robinson: Long-term costs very low

ECONOMIST Dr. Justin Robinson believes that the long-term costs of a country defaulting on its debt repayments are very low.

He has said that this is shown in several economic studies, which have been undertaken on debt issues.

“You lose capital market access immediately, but typically within three months to three and half a years you regain full capital market access, and the GDP losses are not that great,” said Dr. Robinson, who is the acting director of Sagicor Cave Hill School of Business at The University of the West Indies (The UWI).

He made the comments at a lecture presented at The UWI, Cave Hill campus. The inaugural Faculty of Law Lecture was delivered by Dr. Annamaria Viterbo, Associate Professor at the University of Turin, Italy and it dealt with debt issues.

The UWI professor maintained that some economists have asked the question, why countries don’t just default and why do they bother to repay their debts. Unlike other borrowers, he declared, there is no collateral or external facility for enforcing payments of these debts.

He said that the reputational impact is however important to a country. He said that a sovereign debt restructuring issue is a subject that is very dear to several countries in the Caribbean.

Dr. Robinson pointed out that many of them, including Barbados, had undergone sovereign debt restructuring, which is proving to be quite common in the region while noting that it is an old issue in economics.

The other countries which have restructured debts include Antigua and Barbuda, Belize, Dominica, Grenada, Guyana and Jamaica. Trinidad and Tobago, St. Lucia and St. Vincent and the Grenadines are the ones which have not gone that route.

However, some of them, including Barbados, Jamaica and Belize, have defaulted on their external loan repayments.

He remarked that an interesting feature about the presentation was that it was useful, and it tried to craft an international financial architecture that covers a much broader range of countries and countries facing a much broader range of circumstances.